It still makes sense to go to college, Fed study says

MarkPeters and Douglas Belkin

Who earns more, a recent graduate from a flagship state university with a bachelor’s degree or one who finishes a two-year technical program at a little-known community college?

The answer isn’t so clear.

As states for the first time mine certain degree data from public colleges, they are finding salaries for holders of associate degrees in a technical field are outstripping many of those with four-year degrees, at least early in a career.

The growing body of data, from states including Texas, Colorado and Indiana, takes a sober new look at the value of a postsecondary education in a slowly recovering economy.

Overall, the findings reinforce a college degree is worth it. But they highlight the reconsideration of a long-held article of faith that a four-year college degree is the surest ticket to the middle class and an associate degree is its poor country cousin.

In Indiana, figures show after a year in the workforce a graduate of Ivy Tech Community College on average makes more than a similar graduate of the Indiana University.

In Colorado, Tessa DeVore earned a two-year nursing degree from Front Range Community College in 2010. The degree cost her $23,000, but her starting salary was $53,000.

“At my hospital, the salary doesn’t increase any faster if you have a four-year degree,” she said. “For me, this was absolutely the way to go.”

A New York Federal Reserve study released Tuesday found that both associates and four-year degrees remain solid investments, even as the cost of going to school rapidly escalates and real wages decline for graduates.

New York Federal Reserve Bank economists Jaison Abel and Richard Deitz in the new study calculated the return on investment for a college degree, pegging it at about 15% for current graduates. The figure, which far surpasses typical returns for stocks and bonds, has held largely constant for more than a decade.

Surprisingly, the economists find the return on a bachelor’s and associate degree is largely the same and has remained that way for several decades. The difference in wages between the two degrees also has remained relatively constant, with a bachelor’s degree holder currently making annually about $65,800 and an associate’s holder making about $46,300.

Degree-holders of all stripes shouldn’t rejoice just yet. Helping to keep up the value of all college degrees are the declining prospects for those without one. Real wages for high-school graduates have been falling, helping to keep the earnings premium for a college degree near its all-time high. At the same time, the lower wages mean workers lose less in earnings by exiting the workforce to get a degree.

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